Nominated Bank’s Role

A Nominated Bank’s Role

A Nominated Bank is authorized by the issuing bank to pay, accept, or negotiate under a letter of credit. It acts on behalf of the issuing bank.

Responsibilities of a Nominated Bank

1. Payment Obligation: Authorized to pay the beneficiary upon presentation of compliant documents.
2. Acceptance Role: Can accept drafts drawn under the letter of credit.
3. Negotiation Authority: May negotiate documents, advancing funds to the beneficiary against compliant documents.

Examples

• Payment Obligation: A Nominated Bank pays $100,000 upon document presentation.
• Acceptance Role: Accepts a draft for $50,000 maturing in 60 days.
• Negotiation Authority: Negotiates a set of shipping documents for $75,000.

Key Functions

1. Verification: Examining presented documents for compliance with letter of credit terms.
2. Communication: Coordinating with the issuing bank for discrepancies.
3. Record-Keeping: Maintaining records of transactions made under the letter of credit.

Multiple Nominated Banks can exist for a single letter of credit, each authorized to engage in these activities within controlled jurisdiction boundaries.